US President Donald Trump and Indian Prime Minister Narendra Modi maintain a joint press convention within the East Room of the White Home in Washington, DC, on February 13, 2025.
Andrew Caballero-Reynolds | Afp | Getty Photos
India’s inventory market confirmed little signal of panic a day after the U.S. introduced a 50% tariff on items from the nation and threatened secondary sanctions over its continued oil commerce with Russia.
The Sensex, the benchmark index for India’s blue-chip shares, was down 0.8% as of 1:50 p.m. Mumbai time (4:20 a.m. ET) on August 7.
From bureaucrats to companies, there is a broad consensus in India that the newest escalation from the U.S. is simply a strain tactic to fast-track commerce talks. Nevertheless, Indian Prime Minister Narendra Modi now has one thing he did not have, even a day earlier: the help of the Indian opposition to push again.
Rahul Gandhi, the chief of India’s largest opposition social gathering, the Indian Nationwide Congress, described the penalty for Russian oil purchases as “financial blackmail” by Trump, additional lowering the political room for Modi to concede to American calls for.
Consequently, the Indian negotiators’ resolve could solely get stronger, particularly in talks over areas that straight have an effect on the nation’s farmers.
“India won’t ever compromise on the pursuits of the nation’s farmers, fishermen, and livestock breeders. I do know it can value me personally, however I’m prepared,” Modi mentioned on Thursday morning, hours after the U.S. elevated tariffs.
Financial impression
By most estimates, the price of dropping commerce with the U.S. is critical for India however not debilitating.
Probably the most pessimistic estimate is from Morgan Stanley. It says that if all items are topic to a 50% responsibility, the impression on India’s gross home product is more likely to be 60 foundation factors, about $23 billion at present trade charges.
Then again, the price of permitting U.S. dairy exports into India — one of the vital contentious points— is predicted to value India 1.8 lakh crore rupees ($20 billion) alone, in response to SBI Analysis, a unit of the nation’s largest financial institution. Somewhat over half of that burden will hit farmers straight within the type of falling retail costs, SBI mentioned, until the federal government compensates for the loss.
Indian exports to the U.S.
| Sector | Exports to the U.S. in 2024 | Share of India’s exports to the U.S. |
|---|---|---|
| Electronics | $11.1 billion | 14.30% |
| Gems and jewellery | $9.9 billion | 12.80% |
| Prescription drugs | $8.1 billion | 10.40% |
| Nuclear reactors, components, equipment | $6.2 billion | 8% |
| Refined petroleum merchandise | $5.8 billion | 7.50% |
Supply: India’s Ministry of Commerce
The extra tariffs is also catastrophic for India’s gem and jewellery corporations, a spokesperson for the business foyer advised CNBC-TV18 on Thursday, whereas Indian seafood exporters, who promote the majority of their produce to the U.S., could lose almost $3 billion a 12 months on the 25% tariff efficient as we speak, in response to analysts at Morgan Stanley.
India’s labour-intensive textile business, in the meantime, expects $5 billion price of enterprise to maneuver away from India within the subsequent few months as a result of tariffs.
Excessive U.S. duties will even have an effect on India’s capacity to draw international direct funding (FDI), in response to Arvind Sanger from Geosphere Capital Administration, a New York-based dealer.
India’s place is bolstered by the truth that over 60% of its GDP comes from home consumption, nonetheless.
The Indian rupee would be the instant casualty, in response to Mahesh Patil, who oversees greater than 3 lakh crore rupees ($35 billion) price of economic property on the Mumbai-based Aditya Birla Mutual Fund as its chief funding officer. Nevertheless, Patil additionally famous that the rupee settling at decrease ranges towards the U.S. greenback could offset a number of the hit on Indian exporters, and the impression could also be seen with a lag of some months.
A snapshot of India’s commerce with the U.S.
| Complete bilateral commerce in 2024 | $212.3 billion |
| Items commerce | $129 billion |
| Providers commerce | $83.4 billion |
| U.S. deficit in items commerce with India | $45.8 billion |
| U.S. surplus in providers commerce with India | $102 million |
Supply: United States Commerce Consultant
About 40% of India’s whole commerce with the U.S. is in providers, which isn’t even some extent of debate as far as the U.S. exports extra providers to India than it imports. Trump additionally hasn’t paid heed to the decision for curbs on the H1-B visa, which is a route principally utilized by Indian nationals trying to fill expertise gaps — significantly within the tech sector — within the U.S.
India’s center floor
Amid Trump’s risk of secondary sanctions on India, Modi is planning his first go to to China since 2018. And, shut on the heels of U.S. envoy Steve Witkoff, India’s Nationwide Safety Advisor Ajit Doval is visiting Russia in an effort to pursue India’s pursuits via diplomacy.
In the meantime, India’s international ministry has hit out at what it calls U.S. hypocrisy in ignoring its personal commerce with Russia that has continued via the struggle in Ukraine, an allegation that Trump brushed apart however did not deny. It is also vital to notice that Indian corporations personal stakes in lots of Russian oil fields.
Trump’s commerce advisor, Peter Navarro, has additionally alleged that India makes use of the {dollars} from commerce with America to pay for Russian oil, nonetheless most of India’s oil commerce with Russia is settled in dirhams, the forex of the United Arab Emirates (UAE), refiners have advised CNBC-TV18.
India has been much more prepared than Brazil and China to discover a center floor with the U.S.
The federal government has already diminished duties on imports of U.S. bikes, bourbon, ethernet switches, artificial flavoring essences and fish hydrolysate, to call a couple of. It has additionally allowed Tesla to arrange store in Mumbai and withdrew the equalization levy on web giants, broadly referred to as the Google tax.
India has additionally elevated its oil purchases from the U.S. by 120% within the final six months, supply within the Indian authorities advised CNBC-TV18, which was one in every of Trump’s main calls for when Modi visited the White Home in February 2025.
Nevertheless, since then, Trump has moved the goalposts from simply lowering the U.S.’ commerce deficit with India to the South Asian nation’s relationship with Russia.
Watch and wait?
Trump has mentioned India’s purchases of Russian oil are why it is now going through tariffs of fifty%, with this full charge resulting from be imposed 21 days after Trump’s govt order was signed Wednesday.
Regardless of this, New Delhi’s tone and rhetoric have been milder than the statements coming from Beijing or Rio De Janeiro, nevertheless it’s additionally sticking to its purple traces. India is eager to make use of the 21 days earlier than to discover a win-win state of affairs, a authorities official advised CNBC-TV18.
Whereas the Indian authorities hasn’t hinted at any escalation on its finish, some specialists consider that India has some authorized choices at its disposal.
“It is necessary that we speak to our buying and selling companions and like-minded nations who’ve been hit by comparable actions by the U.S.,” Anjali Prasad, the previous Indian ambassador to the World Commerce Group, mentioned.
“Solely after we get collectively, determine on a technique, will there be some motion successfully doable, as a result of there may be power in numbers.”
The truth that Trump is because of meet Russian President Vladimir Putin within the coming days, in the meantime, exhibits that the U.S.’ precedence is to finish Russia’s struggle on Ukraine.
If there is a breakthrough in talks between Trump, Putin, and Ukrainian President Volodymyr Zelenskyy, India’s oil purchases from Russia may now not be an issue.
The motivation for India to observe and wait, as a substitute of speeding with concessions, is correct there.
— Parikshit Luthra, Delhi bureau chief at CNBC-TV18, contributed to this report.
Sriram Iyer leads CNBC-TV18’s digital workforce as govt editor. He has over 18 years of expertise throughout each Indian and world retailers, starting from The Indian Specific to Reuters and Enterprise Insider India.
